Still Time to Dump Bailed-Out Banks: Economist

CNBC.com

Wednesday, 9 Mar 2011 | 4:46 AM ETCNBC.com

SHARES

Governments bailing out failing banks was "an obvious mistake," while global economic growth will "peak" in Autumn and another recession could follow, according to Roger Nightingale, economist at Pointon York.

"You mustn't buy out failing companies, whether they are banks or not," Nightingale told CNBC Wednesday said. "Everybody looking at it now regrets that they bailed out those banks."

Banks Bailout a Mistake

â??We should never have let them go,â? Roger Nightingale, strategist at Pointon York, told CNBC on the state rescue of Lloyds and RBS. â??We should not buy up failing banks, itâ??s obvious it was a mistake.â?

It's not too late to "pull the plug" and dump the banks, he added.

His comments came as bailed-out British lender Lloyds Banking Group unveiled management changes. The company said that its insurance and retail heads are stepping down. Lloyds is 41 percent owned by the UK government.

"When the bonuses come out, the general public feels slightly irritated," Nightingale said with a hint of understatement, on news that Royal Bank of Scotland, another state-backed bank, unveiled that its chief executive Stephen Hester will receive a 2010 pay package of £7.75 million ($12.5 million). The package will include £4.45 million in shares.

Growth Peaking

If a recession materializes, it could be especially severe on the back of rate hikes from central banks in emerging markets, as well as the European Central Bank expected hike in April, Nightingale said.

"Secularly high levels of personal debt and secularly low levels of personal sentiment" will also continue to weigh on growth prospects, he added.

Nightingale went on to say that governments' "whistling" about a broadening and deepening recovery is just "to keep up their spirits," and that they "know they've got it wrong. But they're unwilling to admit it."

Countries that are looking the least troubled include the US, Germany and Japan, in Nightingale's opinion. But he singled out Britain as the country that has made more mistakes than others.

Contact Europe: Economy

CNBC NEWSLETTERS

Get the best of CNBC in your inbox

Please choose a subscription

Breaking News

CNBC's latest news headlines

Morning Squawk

Daily before the bell news roundup

Evening Brief

Daily recap of the day's top headlines

Guest Alerts

Guest information & reminders for your calendar

Your Wealth

Weekly advice on managing your money

Options Action

Insight from the Options Action panel

Please enter a valid email address

To learn more about how we use your information,please read our Privacy Policy.